Shaw Communications Inc.

I do not own this stock of Shaw Communications Inc. (TSX-SJR.B, NYSE-SJR). It was a stock on Investment Reporter list (MPL Communications Publication).

The dividends have increased by 7% and 44.5% per year over the past 5 and 10 years. The big increase over the last 10 years was probably deliberate as the company started off paying very low dividends and then did some big increases that increased the portion of profits that they paid out. The last dividend increase was for 7.8% in 2014.

Dividends in the future will probably close to the 5 year growth in dividends. The 5 year Dividend Payout Ratios are 66% for EPS and 27% for CFPS. The DRPs for 2013 was at 61% for EPS and 33% for CFPS. I doubt that they will be doing anymore big dividend increases from now on. They have a very good dividend which has a yield of 4.45%

The Total Return over the past 5 and 10 years has been at 6.56% and 12.44% per year for the past 5 and 10 years. The dividend portion of these returns is at 4.19% and 4.14% per year, respectively. The capital gains portion of these returns is at 2.37% and 8.3% per year, respectively.

Outstanding shares have increased by 1% per year over the past 5 years and are down slightly over the past 10 years. Shares have increased due to Stock Options, DRIPs and Share Issues. Shares have decreased due to Buy Backs. Growth in Revenues and Earnings has been mostly quite good over the past 5 and 10 years. Growth in Cash Flow, not so good.

Revenue per Share has grown at 9.4% and 10.17% per year over the past 5 and 10 years. The EPS has grown by 1% and 35% per year over the past 5 and 9 years. However, if you look at 5 year running averages, the EPS has grown by 11.4% and 41.6% per year over the past 5 and 7 years. The problem with earnings is that 10 years ago the company had an earnings loss, so I cannot calculate growth from 10 years ago.

Cash Flow per Share has grown by 1.3% and 10% per year over the past 5 and 10 years. If you look at 5 year running averages, the CFPS has grown by 8.4% and 16% per year over the past 5 and 10 years. The problem with cash flow is that there is good growth until 5 years ago and there has not been much growth in the last 5 years.

It is only in the last 8 years that the Return on Equity has been above 10%. Before that, ROE was quite low. The 5 year median ROE is 18.9% and the ROE for 2013 is 17.8%. The ROE on comprehensive income is quite close with the ROE for 2013 at 17.9% and the 5 year median ROE at 17.9% also.

One thing that I do not like with this stock is the Liquidity Ratio and it has been low. The Liquidity Ratio for 2013 is at 0.54. This means that the current assets cannot cover the current liabilities. If you add in cash flow after dividends the ratio becomes only 0.96. If you take off the current portion of the long term debt, then the Liquidity Ratio is 0.96 and if you use the cash flow after dividends it is 1.68.

In either case, the company depends on cash flow to cover current liabilities. Maybe not so good when cash flow is flatting. You can see this in the Operational Profit Margin (CF/Revenue) Ratio which has declined by almost 35% over the past 5 years. What you want is for the OPM to be stable or increase. A decrease is not a good sign.

The Debt Ratio is mediocre and has always been. The current Debt Ratio is 1.53 which I fine but the 5 year median Debt Ratio is 1.39. The current Leverage and Debt/Equity Ratios are currently lower than what they have been and are fine at 2.76 and 1.76 currently. The 10 year median ratios are at 3.64 and 2.64, respectively.

Analysts expect the cash flow to increase substantially in 2014 by some 150%. The first quarter shows some sign of a good increase with the Year over Year increase at 28% when looking at the 12 month period to August 2013 and the 12 months period to November 2013.

The debt ratios are rather normal for this sort of company, but generally, when companies are largely owned by an individual or family, the debt ratios are better than normal. This is not true in this case where there two levels of shares of Class B shares which are non-voting and the Class A shares which are voting shares. The Shaw family owns most of the Class A shares.

Communications companies are no longer the widow and orphan stocks that they used to be when I started investing. I still have some BCE (TSX-BCE) that I bought in the 1980's, and I have done quite well with it over the years. I also have Manitoba Telecom (TSX-MBT) which I bought in 2006 and I consider this a big mistake.

With changes in technology, you have to wonder how well these companies are going to hold up in the future. They are not a part of the market that I am currently interested in. See my spreadsheet at sjr.htm.

This is the first of two parts. The second part will be posted on Wednesday, February 5, 2014 and will be available here.

Shaw Communications Inc. is a diversified communications company whose core business is providing broadband cable television, Internet, digital phone and satellite direct-to-home services. Industry: Communications & Media (Cable). SJR.B shares are non-voting and the SJR.A shares are voting shares. Its web site is here Shaw Communications.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.